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Payback Time
Gazprom Sextuples Ukraine's Unpaid Gas Bill

Well, that’s not very nice. Russia’s state-owned gas company, Gazprom, has added a whopping $11.4 billion to Ukraine’s state-owned gas company Naftogaz’s already-sizable $2.2 billion bill. The massive surcharge comes under one of the most controversial provisions of Gazprom’s contracts, the so-called “take-or-pay” conditions, where the customer is charged for a previously agreed-upon amount of gas, whether or not it actually consumes that amount.

This added debt could endanger a separate loan Moscow extended to Kiev back in December, which specified that Ukraine’s total debt should remain below 60 percent of the country’s GDP. As the WSJ reports, the additional take-or-pay charge is pushing Ukraine’s debt dangerously close to the 60 percent mark:

So far the ratio is below the 60% threshold, but Russia’s finance ministry said it is monitoring the figures “closely.”

The latest figures from Ukraine put state debt at 804 billion hryvnia ($70 billion), or 52,7% of the GDP. If Gazprom’s demand is met, the ratio would rise above the 60% threshold.

But if Ukraine’s past actions are any indication, the country will refuse even to acknowledge this new bill, let alone work towards repaying it:

[I]t’s far from certain that Gazprom’s demand will be met and Ukrainian officials have repeatedly indicated they would not recognize it. The claim results from a so-called “take-or-pay” contract, which makes the buyer pay for a contracted volume of gas, regardless of the actual amount purchased. […]

It is not the first time that Gazprom has failed to make one of its buyers pay for contracted gas. In 2012, Gazprom claimed that the Czech unit of Germany’s RWE did not fulfill its take-or-pay agreement. However, the European company won a landmark dispute with the Russian energy giant after a court ruled that it did not have to pay fines under this clause.

Gazprom’s announcement of the new charge coincides with the news that the IMF will discuss a $17 billion bailout for Ukraine next week. Western support has been keeping Ukraine afloat so far, but Kiev risks becoming a money pit for foreign aid if Russia continues to tighten the screws with demands like this one. The funds pledged to Ukraine by the IMF, the US, and Europe look destined to be deposited straight into Putin’s pocket.

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  • adk

    This latest news is yet another indicator that the quarter-hearted measures adopted by the West against Russia won’t do. You either go all in against Russia economically, or, by Putin’s designs, you’d either be holding a big bag for Ukraine or made look totally pathetic for all to see. It’s an untenable situation, and Putin just keeps raising the stakes.

    • Alex K.

      “You either go all in against Russia economically”

      Yes. Ignore Europe and impose serious sanctions. Banks, Gazprom, oil companies…

  • B-Sabre

    I for one am shocked…shocked at ths new development.

  • Alex K.

    This only shows that the US should act decisively against Russia ignoring the co-called “concerns” of EU countries. They have a history of caving to dictators and no moral backbone whatsoever – those Europeans are only good at criticizing America for using the death penalty and vilifying Israelis.

    The US can ruin Russia’s economy by going after its banks and energy companies. In some ways, Russia is a house of cards: remove the top and it will crumble. Why keep recognizing Putin as its legitimate president? No well-informed Russia observer doubts that the 2012 presidential election was rigged. Take the TV out of Putin’s paws and Russian public opinion will change overnight..

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